Adeosun
Further to the states debt repayment deferral for the month of March that was announced last Thursday, the Federal Ministry of Finance has clarified that the debt repayments due to the States’ creditors will be fully paid notwithstanding the deferral. The Federal Government will make the due debt repayments, which would be offset against liabilities owed to the States. Hence all creditors, including bondholders, will not be adversely impacted.
The Ministry further reiterated that the deferral is not a bail out but rather a responsive measure by the Federal Government to put States in a better position to meet their salary obligations. The deferral amounts to a total of N10.9 billion.
All states will receive the relief in this instance, however further deferrals will be subject to the agreement of a Fiscal Restructuring Plan to be prepared by each state with clear measurable objectives. The Ministry is keen to ensure that the programme of Financial Discipline being driven by the Federal Government is replicated in all tiers of government, including elimination of payroll fraud and increased spending efficiencies in overhead. Enhanced financial transparency by the publication of audited accounts and submission of debt profile may also be required.
Last Thursday, Nigeria’s Finance Ministry regretted the very low income which the government said was the lowest in five years. A release from the ministry emailed to news outlets to that effect read:
“The Federation Accounts Allocation Committee (FAAC) meeting which took place yesterday, presented the lowest FAAC in over 5 years, with less than N300bn in revenue driven by the impact of the historically low oil prices in January and February. This sum also reflects a seasonally low collection period for the Federal Inland Revenue Service (FIRS).”
The ministry further regretted: “With about 27 states currently experiencing challenges meeting their salary payments and in response to the above, obligatory repayments due to the Federal Government from the states in respect of their restructured loan obligations are being deferred for the current month. The deferral amounts to a total of N10.9 billion. This is to ensure that the states are in a better position to meet their salary obligations. We are not able to guarantee that all states will be able to meet their salary obligations, as each state’s situation is dependent on its own cost profile and other obligations it may have, but this initiative is to better position them to do so.”
The ministry statement assured that all states will receive the relief this month, adding that “however further deferrals will be subject to the agreement of a Fiscal Restructuring Plan to be prepared by each state with clear measurable objectives.”
“The Federal Ministry of Finance is keen to ensure that the programme of Financial Discipline being driven by the FG is replicated in all tiers of government, including elimination of payroll fraud and increased spending efficiencies in overhead. Enhanced financial transparency by the publication of audited accounts and submission of debt profile may also be required. Moving states towards fiscally sustainable practices is a key objective of the FG to ensure that Nigeria recovers from the current economic challenges,” the statement concluded.
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